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Ethanol
Fueling Higher Food Prices |
Posted:
09.17.07
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How is the price of gas connected to the cost of breakfast? Increased
demand for ethanol, the fuel being touted as an Earth-friendly
solution to the nation's looming energy needs, is raising the
cost of cornflakes.
Printer-friendly versions: PDF
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Ethanol, a clear, sugar-based alcohol that can be used as a substitute
for oil, is attractive to both consumers and politicians because
it can be produced domestically and from renewable sources.
Ethanol producers also claim that the fuel is better for the
environment, though some skeptics counter that the ethanol production
process actually consumes more energy than it saves.
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Turning corn
to fuel |
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Though it can be made from almost any feedstock with an appreciable
sugar content, the United States makes most of its ethanol from
corn.
The corn is ground and mixed with enzymes and yeast to ferment
it and produce ethyl alcohol, or ethanol. The ethanol can be mixed
in varying quantities with gasoline to
produce a cleaner-burning fuel for cars.
Ethanol has been around for decades but has benefited in recent
years from federal support.
The National Energy Bill passed by Congress in 2005 requires
refiners to increase ethanol production from the current 4 billion
gallons per year to 7.5 billion gallons by 2012.
President Bush highlighted ethanol in his 2007 State of the Union
speech as a way for the United States to reduce its dependence
on oil from the Middle East.
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Effects on
cereal, meat and milk |
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Currently,
ethanol production uses about 20 percent of the U.S. corn harvest,
three times the amount dedicated to biofuels in 2000. This number
is expected grow significantly by the end of the decade.
The increased demand for ethanol is one of several factors (bad
weather is another) contributing to higher corn prices: up to
$4 a bushel, nearly double the price in 2005.
This, in turn, has led to a price increase in foods made from
corn, including breakfast cereals, which are up 4.2 percent, according
to the Consumer Price Index (CPI).
And many livestock feeds are also made from corn, contributing
to higher prices of beef (up 5.8 percent) and milk (up 7.5 percent).
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More farmers
shift to corn |
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Some farmers are shifting their fields from wheat and soybeans
to corn to take advantage of the rising prices and the generous
government subsidies for ethanol production.
Lower supply has driven up the price of crops that would have
been grown in place of corn, including wheat and soybeans. The
CPI reports that the price of wheat bread is up 6 percent.
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At the global
table |
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The effects of ethanol on "agflation" are not restricted
to the United States.
In Guatemala, where many poor farmers live on a diet of corn
tortillas, higher corn prices have been blamed for increased hunger.
The benchmark price of corn in Guatemala, much of it imported
from the United States, is up 30 percent from a year ago.
"The increase in the price of maize has left this sector
of the population much more vulnerable than they were before,"
Ian Cherret, head of the U.N. Food and Agriculture Organization
in Guatemala, told Reuters.
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Finding a
balance |
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Creeping food prices are prompting observers to question whether
there will be enough corn to support an expanding biofuels industry
and a growing population.
"We believe our corn supplies are limited in their ability
to support the continued expansion of biofuels," USDA Deputy
Secretary Chuck Conner told MarketWatch.
 U.S.
and international ethanol producers are already investigating
alternatives to corn, including prairie grass, miscanthus and
switchgrass.
Brazil, the world's second largest ethanol producer, makes most
of its ethanol from sugarcane.
Panda Ethanol, based in Texas, makes ethanol out of cattle manure.
"There are literally mountains of manure in the places we
put our facilities," Todd Carter, CEO of Panda Ethanol, told
Reuters. "We love the idea of taking a renewable fuel to
create a renewable fuel."
However, policy makers in the Midwest and Washington have no
intention of cutting back on corn ethanol production.
As Republican Senator John Thune of South Dakota told reporters
in March, "America's farmers, investors, states in the Midwest
and our federal government have spent literally years in developing
the American ethanol industry, and now is not the time to undermine
it."
--
Compiled by Christina Satkowski for NewsHour Extra
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Both performances were incredibly underwhelming, and offered no real reason for Americans to change their votes. Neither candidate seemed willing to go out on a limb to garner support.
